2022 CRE Trends in Austin, TX
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Austin is way more than parties on Sixth Street and non-stop traffic on I-35. It was a tech city before tech cities were a thing (dude, you’re getting a Dell, remember), and it’s growing at an explosive rate.
Locals will tell you about the traffic and the development, but what does it all mean for Austin commercial real estate trends?
A Great Time for Multiple Asset Classes
Multifamily, student housing, and self-storage are all on fire in the greater Austin area. Studying real estate trends in any market is always a top-down process for multiple reasons.
One, it’s the best way to see how a market is moving because large institutional real estate firms aren’t in the business of throwing good money after bad deals.
While some can argue that point endlessly, the truth is that a line of bad deals will sink a company quicker than water flowing out of a hole in a boat. Going down with the ship when there are so many better options just doesn’t make sense.
Are Sustainable Real Estate Initiatives On the Rise?
Words like “sustainable” and “affordable” are often thrown together to convince people that they are beneficial, but it looks like Austin, TX is getting yet another sustainable real estate initiative. Kilroy Realty announced last month that they picked up a 2.9-acre development site, close to the intersection of Burnett & Braker.
Kilroy picked up the land for $40 million, with the goal of building a Class A office development. From looking at their press release, it doesn’t sound like the focus on this project is affordability, but it will be interesting to see what sustainable initiatives are placed on this project.
The deal is still new; construction isn’t even set to begin until this summer.
The Real Lesson Behind Kilroy’s Acquisition
While sustainability is an important discussion, that isn’t what should be the takeaway from Kilroy’s development work here. After development finishes up, the company will have 493,000 square feet of prime office development space, ready to go for tenants, their own interests, and ongoing equity building objectives.
The location’s benefits are obvious: this is going in place right before the light rail improvements and will give office workers of all levels access to the Domain neighborhood with ease.
This business zone of Austin, TX is already known for huge tech giants like Indeed, Expedia, and Amazon, making it even more appealing for future office building tenants.
Business owners look at location like anyone else; being in proximity to tech giants is desirable, as it brings a little of that large corporation shine to a smaller operation. If you can be close to Meta (formerly Facebook), why wouldn’t you?
Austin, TX’s Multifamily Market Continues to Sizzle Into 2022
Tracking big acquisitions is like hunting big game. Sometimes it’s about the final price tag, sometimes it’s about the features, but really, it’s about the adventure of seeing large companies truly put currency to work in the best of ways.
One company making a splash in CRE right now is The Connor Group, an Ohio-based real estate investment company that acquired Edison Riverside. This 354-apartment community is located in downtown Austin, a prime piece of real estate with obvious amenities.
While the financial details are hush-hush, a multi-million dollar figure is assumed for a purchase of this size.
This is the 4th transaction from The Connor Group within the last six months, a good sign that this company and other non-Texas firms are going to continue considering Austin valuable enough to seek out deals for the long term.
Is Blackstone Taking Affordable Housing to the Next Level in Austin, TX?
Affordable housing, like so many things, is always in the media. This is with good reason, of course: inflation is taking prices skyhigh, whether the grocery store or the gas station.
Unfortunately, it doesn’t look like prices are going to come down anytime soon, and supply chain issues continue to rage right alongside inflation concerns.
Blackstone jumped into the affordable housing fray by announcing in late February that they are forming April Housing, their subsidiary completely dedicated to affordable housing.
While they aren’t focusing only on Austin, it is likely they will target Austin in the months and years to come by focusing on the Low Income Housing Tax Credit (LIHTC) program.
The Unwritten Goodwill of Affordable Housing
Commercial property owners interested in expanding to or deepening their existing interests in the multifamily sphere might feel that affordable housing’s benefits are only financial. However, the public sentiment on affordable housing is mostly positive.
In a survey conducted by Data For Progress, a progressive polling firm, 60% of survey respondents did say that they want to see a public option for housing that’s affordable.
It is also important to remember that affordable housing does not free housing. As long as property owners still follow Fair Housing guidelines, it is quite possible to fill units, make money, and, more importantly, build deeper connections in the community.
Multifamily Housing Is a Primary Driver of Austin, TX’s Community Growth
While Americans dream of homeownership, rising costs mean that they will undoubtedly rent longer than their parents and grandparents did in the past. This has some important impacts on multifamily housing, communities, and cities like Austin for the following reasons:
- Multifamily units are safe places for people to live, and safety is more important than ever.
- Young professionals starting out will often look to others in their immediate area for socializing, networking, and connection.
- When one person looks out for another, the entire community thrives.
- People in multifamily housing units may stay for a short term or an extended period of time, and often feel responsible for keeping the unit looking great.
Everyone deserves to feel at home, and property owners providing safe, well-lit units is an important component of the community.
As more conversations continue to center around affordable housing, multifamily units will continue to be a point in the general discussion.
Claiming Trends for the War Chest
Watching the trends is one thing, but pulling the trends into your war chest of strategies is another thing entirely. Multifamily, self-storage, and office development are all hot in Austin, but it’s important to look at the greater picture.
From the 50,000 view of things, this means that exploring these niches is a good idea, but looking at how they feed a healthy community is even more important.
Between sustainable and affordable housing efforts is also a need to balance the needs of an affluent market that wants and expects amenities to keep up with other markets.
Juggling all of these competing needs is not for the faint of heart, but commercial real estate fans that are looking for a challenge would do well to continue studying the red hot Austin commercial real estate market.
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